Tax Court Decision Typo! PPh 26 Tax Base on PT GTS Royalty Drastically Rises from IDR 2.6 Billion to IDR 14.4 Billion After Correction

The application of Article 82 of the Tax Court Law (UU PP) becomes crucial when there is a fundamental discrepancy between the facts of the dispute and the figures stipulated in the verdict, as experienced by PT GTS in the PPh Withholding/Collection dispute for the February 2019 tax period. This case highlights the risk of administrative errors in the tax judicial process, resulting in a significant change to the fiscal value that PT GTS must bear. Correction of this Decision explicitly rectifies the Tax Base (DPP) of PPh Article 26 on a royalty transaction from IDR 2,679,950,138.00 to IDR 14,444,279,809.00.

The initial dispute focused on the positive correction of PPh Article 26 which the Directorate General of Taxation (DJP) believed was due on royalty payments to a Foreign Taxpayer (WPLN), an obligation that PT GTS failed to fulfill. The DJP based the correction on Article 26 of the Income Tax Law (UU PPh), which mandates a 20% PPh withholding tax (or a lower tax treaty rate) on royalty income if the WPLN fails to meet the requirements of the Double Tax Avoidance Agreement (P3B). Although the substance of the dispute is PPh 26 on royalty, the core conflict in the correction decision is the DJP's claim that the initial Verdict contained clerical/calculation errors that resulted in the tax due being much lower than the actual assessment value. The DJP filed a request for correction, dramatically increasing PT GTS’s tax liability by IDR 11,764,329,671.00.

The Tax Court Judges granted the DJP's request for correction in its entirety. After verifying the tax administration documents underpinning the dispute, the Panel concluded that the error in stipulating the SKP number, tax period, and especially the crucial fiscal values (DPP PPh Article 26, PPh Due, and Administrative Sanctions) was a factual clerical or calculation error. The utilization of Article 82 of the Tax Court Law allows the Panel to correct such errors in the interest of legal certainty and material truth. This Correction Decision rectified the total PPh still payable, including administrative penalties, from approximately IDR 770,110,472.00 to IDR 4,150,708,246.00.

This decision affirms that the mechanism for correcting a verdict is a legitimate legal instrument to fix formal defects. The impact on PT GTS is significant, as PT GTS must now face a substantially higher tax liability. This case serves as a critical reminder for all Taxpayers and legal counsel to perform a rigorous double-check of every fiscal figure stipulated in the Tax Court Decision immediately after it is rendered. Generally, this decision strengthens the DJP's administrative practice, ensuring that technical errors at the judicial stage do not negate a proved substantial PPh Article 26 correction. The core issue of PPh 26 royalty and P3B remains a sensitive area of dispute requiring strict compliance documentation, especially regarding the fulfillment of the DGT Form.

The PPh Article 26 correction on royalty demonstrates the complexity of determining foreign tax subjects and objects. However, the primary lesson from this Correction Decision is that Taxpayers must be vigilant about the administrative accuracy of legal documents, as a visible clerical error can be corrected and carry a financial impact equivalent to losing the substantive dispute.

A Comprehensive Analysis and the Tax Court Decision on This Dispute Are Available Here